Alleged costs to avert business interruption loss rejected (US)

In July 2012 a fire damaged equipment vital to the production of a steel pipe manufacturing plant in Arkansas. The fire was a covered peril and loss of business income and extra expenses were also covered. The court rejected the insured’s claim for an additional $14 million in mitigation costs incurred allegedly as ‘necessary expenses’ in moving production overseas. After the fire the insured suspended operations, but to meet delivery dates (and to preserve a client relationship) transferred production to an affiliate in India and undertook to pay the Indian manufacturer’s costs associated with the shift in production. The policy covered actual loss of business income incurred during a period of restoration directly resulting from the damage by the peril insured against and necessary expenses the insured incurred in excess of normal operating expenses to reduce loss of business income during that period. The insured claimed the costs of producing…

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